The yen strengthened against the dollar on Monday
After Prime Minister Sanae Takaichi's coalition secured a resounding victory in Sunday's elections, ending a six-day losing streak as traders bet that fiscal stimulus would boost the stock market.
The yen initially weakened slightly after Takaichi's win, hitting a two-week low, but recovered as trading continued. The dollar was trading at 155.70 yen, down about 0.97% against the Japanese currency.
"The movement in Japan is undoubtedly one of the factors contributing to the dollar's weakness," said Eugene Epstein, head of asset structuring for North America at MoneyCorp in New Jersey. "Historically, or at least since last year, the situation in Japan has had a knock-on effect on other markets and even other asset classes."
Atsushi Mimura, China's top foreign exchange official, said earlier today that the government is "closely monitoring currency movements" after the Takaichi coalition secured a historic election victory.
One factor weighing on the dollar was talk of major investors diversifying away from U.S. markets.
Bloomberg News reported that Chinese regulators advised financial institutions to reduce their exposure to U.S. Treasury bonds, sending the yuan to a 33-month high against the dollar.
The dollar fell 0.21% against the yuan to 6.915 in offshore trading, its weakest level since May 2023.
Traders are increasing their bets on the U.S. Federal Reserve easing monetary policy this year.
The dollar index, which measures the greenback against a basket of six currencies, fell 0.7% to 96.88 at the start of a week packed with key data releases from Washington, including retail sales, inflation, and the delayed jobs report.
The euro rose 0.80% against the dollar to $1.19085, its highest level since January 30.
The pound sterling climbed nearly 0.55% against the dollar to $1.36825.
